Gov’t partially awards T-bills at higher rates on hawkish BSP

The government partially awarded the Treasury bills (T-bills) it auctioned off on Monday as rates rose following hawkish statements from the Bangko Sentral ng Pilipinas (BSP).

The Bureau of the Treasury (BTr) raised PHP 14.5 billion from its offering of T-bills on Monday, lower than the planned PHP 15 billion, even as total bids reached PHP 30.444 billion or more than twice the amount on the auction block.

Broken down, the Treasury awarded only PHP 4.5 billion in 91-day T-bills, below the PHP 5-billion program, despite tenders for the tenor reaching PHP 6.072 billion. The three-month paper was quoted at an average rate of 5.592%, 8.6 basis points (bps) higher than the 5.506% seen for a full award last week. Accepted rates ranged from 5.55% to 5.65%.

Meanwhile, the government raised PHP 5 billion as planned from the 182-day securities as bids stood at PHP 10.26 billion. The average rate for the six-month T-bill stood at 5.972%, up by 9.3 bps from the 5.879% fetched last week, with accepted rates at 5.894% to 5.95%.

Lastly, the BTr borrowed the programmed PHP 5 billion via the 364-day debt papers as demand for the tenor totaled PHP 14.112 billion. The average rate of the one-year T-bill inched up by 1.5 bps to 6.079% from the 6.064% quoted last week. Accepted yields were from 6.05% to 6.09%.

At the secondary market on Monday before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.5704%, 5.8597%, and 6.0791%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provid-ed by the BTr.

“The higher T-bill rates reflected the latest hawkish statements from the BSP policy meeting last week,” a trader said in an e-mail.

The Monetary Board last week kept the policy rate at a near 17-year high of 6.5% for a third straight meeting, as expected by 15 of 17 analysts in a BusinessWorld poll. Interest rates on the overnight deposit and lending facilities were also left unchanged at 6% and 7%, respectively.

The BSP raised borrowing costs by 450 bps from May 2022 to October 2023.

BSP Governor Eli M. Remolona, Jr. said in a statement that the central bank is ready to adjust its monetary policy settings as necessary amid upside risks to inflation.

BSP Senior Assistant Governor Iluminada T. Sicat said there is “scope for a rate cut” this year as soon as they see a sustained inflation downtrend.

“While we see some improvement in headline and core, we still consider taking a more prudent monetary policy stance at this moment,” Ms. Sicat said at a briefing on Thursday.

“We need to maintain our hawkish position but in terms of tone, it’s not as strong as what we had last December. But we continue to be hawkish looking at developments here and abroad,” she added.

T-bill rates rose on Monday amid the government’s ongoing retail Treasury bond (RTB) offer, which resulted in reduced liquidity in the market and lower auction bids, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Last week’s T-bill offer fetched bids worth PHP 49.292 billion, or more than thrice the PHP 15 billion on the auction block. The BTr raised PHP 17 billion via the short-tenored papers last week as rates mostly moved sideways.

The government last week also raised an initial PHP 212.719 billion from the five-year RTBs as tenders at the rate-setting auction reached PHP 272.708 billion, or more than nine times the PHP 30 billion on offer. The retail bonds fetched a coupon rate of 6.25%.

The public offer period for the RTBs and submission of bond exchange offers began on Feb. 13 and is scheduled to end on Feb. 23, unless closed earlier by the Treasury. The new retail bonds will be issued and settled on Feb. 28.

The BTr plans to raise PHP 150 billion from the domestic market this month, or PHP 60 billion via T-bills and PHP 90 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year or PHP 1.39 trillion. — A.M.C Sy